Table of Contents
Key Points
- Transnet Freight Rail has improved coal corridor performance but will fall short of its 75Mt target for 2024 due to decades of underinvestment and poor maintenance.
- The coal corridor’s underperformance, resulting in R150 billion ($8.25 billion) in lost revenue annually, highlights the urgent need for structural reforms and fresh investment.
- Public-private partnerships and organizational restructuring are critical to addressing inefficiencies and unlocking the coal corridor’s full potential.
Transnet Freight Rail (TFR), South Africa’s state-owned logistics operator, has made notable strides in improving the performance of the country’s coal export corridor under the leadership of CEO Michelle Phillips. With the support of the National Logistics Crisis Committee and Business Leadership South Africa (BLSA), TFR has implemented short-term measures to stabilize the system. Last year, coal exports via rail reached over 50 million tons (Mt), a partial recovery from previous years, but still far below the corridor's nameplate capacity of 75Mt.
This shortfall of 25Mt annually has led to an estimated loss of R150 billion ($8.25 billion) in economic revenue. While the improvements in freight volume are commendable, experts like Professor Jan Havenga of Stellenbosch University emphasize that much more needs to be done to restore the corridor to its full potential.
Investment and structural issues hamper progress
Despite TFR's efforts, the coal corridor’s underperformance is a symptom of broader challenges within Transnet’s infrastructure. Years of underinvestment, coupled with maintenance backlogs, have left the network struggling to meet rising demand. Although Transnet has set an ambitious target of transporting over 200Mt across its network, the company is still far from achieving that goal, with a significant shortfall expected for the year.
Professor Havenga points to the slow pace of restructuring Transnet as a key bottleneck. The implementation of Public Sector Partnerships (PSPs) — which could attract private sector investment for vital infrastructure rehabilitation — has been sluggish. Additionally, the lack of a coherent financial model and robust portfolio analysis has delayed the much-needed capital infusion into the system, leaving the network in a precarious position.
Economic impact and shift in coal transport
In addition to infrastructure challenges, a decline in coal prices has contributed to a drop in road transport volumes. Last year, 22.5Mt of coal was exported via road, bringing the total combined exports by road and rail to 72Mt. However, this year, road volumes are trending 10Mt lower, making it even more critical for Transnet to maximize rail capacity to meet export demand.
The global energy landscape is also evolving, with the recent U.S. election result — bringing Donald Trump back to office — sparking speculation about potential shifts in energy trade policies. Analysts predict that a rollback of environmental, social, and governance (ESG) policies could reduce costs for fossil fuel investments, including coal. However, experts warn that the U.S. has significantly reduced its reliance on coal over the past decade, largely due to the surge in natural gas production driven by fracking.
